Correlation Between Disney and PureCycle Technologies

Can any of the company-specific risk be diversified away by investing in both Disney and PureCycle Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Disney and PureCycle Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walt Disney and PureCycle Technologies, you can compare the effects of market volatilities on Disney and PureCycle Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Disney with a short position of PureCycle Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and PureCycle Technologies.

Diversification Opportunities for Disney and PureCycle Technologies

0.63

Correlation Coefficient

Disney  PureCycle Technologies

Poor diversification

The 3 months correlation between Disney and PureCycle is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and PureCycle Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureCycle Technologies and Disney is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walt Disney are associated (or correlated) with PureCycle Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PureCycle Technologies has no effect on the direction of Disney i.e., Disney and PureCycle Technologies go up and down completely randomly.

Pair Corralation between Disney and PureCycle Technologies

Considering the 90-day investment horizon Walt Disney is expected to under-perform the PureCycle Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 2.88 times less risky than PureCycle Technologies. The stock trades about -0.19 of its potential returns per unit of risk. The PureCycle Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  154.00  in PureCycle Technologies on February 26, 2024 and sell it today you would lose (9.00) from holding PureCycle Technologies or give up 5.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Walt Disney  vs.  PureCycle Technologies

Walt Disney

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Disney is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PureCycle Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PureCycle Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, PureCycle Technologies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Disney and PureCycle Technologies

The main advantage of trading using opposite Disney and PureCycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, PureCycle Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PureCycle Technologies will offset losses from the drop in PureCycle Technologies' long position.

The idea behind Walt Disney and PureCycle Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.